Investment Leadership and Portfolio Management: The Path to Successful Stewardship for Investment Firms (Wiley Finance)

227 Pages·2009·2.52 MB·English

by  Brian Singer

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Investment
Leadership and
Portfolio Management
i
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Investment
Leadership and
Portfolio Management
The Path to Successful Stewardship
for Investment Firms
BRIAN SINGER
GREG FEDORINCHIK
BARRY MANDINACH
John Wiley & Sons, Inc.
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Copyright(cid:1)C 2010byBrianSinger,GregFedorinchik,andBarryMandinach.
Allrightsreserved.
PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey.
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LibraryofCongressCataloging-in-PublicationData:
Singer,Brian,1960–
Investmentleadershipandportfoliomanagement:thepathtosuccessful
stewardshipforinvestmentfirms/BrianSinger,GregFedorinchik,Barry
Mandinach.
p. cm.–(Wileyfinanceseries)
Includesbibliographicalreferencesandindex.
ISBN978-0-470-43540-3(cloth)
1.Portfoliomanagement. 2.Investments. I.Fedorinchik,Greg,1970-
II.Mandinach,Barry,1956- III.Title.
HG4529.5.S5562009
332.6–dc22
2009020140
PrintedintheUnitedStatesofAmerica
10 9 8 7 6 5 4 3 2 1
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Contents
Preface xi
Acknowledgments xvii
CHAPTER1
CharacteristicsofSuccessfulAssetManagementFirms 1
YouCanTaketheBoyOutoftheCulture,butYou
Can’tTaketheCultureOutoftheBoy 3
SizeMatters,butNotintheWayMostPeopleBelieve 7
Governance:TheGuardianofanInvestment-DrivenFirm 12
FosteringCollaborativeFreedom:EverybodyisaPeer 19
Integrity:AnUnquestionableCharacteristicofSuccess 23
Conclusion 25
CHAPTER2
BuildingaCathedral:AFrameworkforTurningtheMission
intoCollectiveAction 27
AFrameworkforEffectiveLeadershipandManagement 28
EstablishingandLivingOrganizationalValues 29
CreatingMissionand/orInvestmentPhilosophyStatements 31
StrategicGoalsandKeyPerformanceIndicators 33
Conclusion 37
CHAPTER3
BuildingaMeritocracy:Understanding,Evaluating,and
RewardingEmployeeContributions 39
Performance:ADeeperDive 39
Horizon:TheFallacyoftheThree-YearTrack
Record 40
PerformanceAnalysis:PracticallySpeaking 45
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vi CONTENTS
Top-downandBottom-upApproachtoDetermining
Performance 48
DesigningYourRatingSystemtoHelpMakethe
DifficultDecisions 51
WhatDoesthePerformanceScoreReallyMean? 53
Criticality:ADeeperDive 53
MeritZones:PuttingItAllTogether 57
CommunicationofPerformanceandCriticality 59
ValuesandCompensation 64
Conclusion 67
CHAPTER4
InvestmentPhilosophyandProcess:ALoftyCathedral
NeedsaDeepFoundation 69
TheImportanceofInvestmentPhilosophyandProcess
inInvestmentOrganizations 69
InvestmentPhilosophy:CoreBeliefs 70
InvestmentProcess:ControlandAnarchy 73
AvoidingthePitfallsofBehavioralBiases 78
Conclusion 83
CHAPTER5
InvestmentProcessinanEvolvingWorld 85
ImplementationOverview:The“How”ofthe
InvestmentProcess 86
FundamentalValuation 88
MarketBehaviorandHowItChallengesthe
FundamentalInvestor 90
TeamBehavior:LessonsfortheCIOfromJellyBeans
andFreud 118
PortfolioDesign 127
Conclusion 129
CHAPTER6
CommunicationforSuperiorClientOutcomes 131
TheProblem:HumanNature 133
AClassicTale 134
Case1:IndividualInvestors,theImpactofPerformance
Chasing 137
Case2:AreInstitutionalInvestorsthe“SmartMoney?” 137
TheRealityofInvestinginEquities 139
TheMathematicsofRecovery 142
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Contents vii
Dilemma:InvestmentFirmorDistributionShop? 143
TheImportanceofCulture 145
SalesandMarketinginanInvestmentFirm 146
Conclusion 149
Appendix:ClientCommunicationinExtremeMarket
Conditions 149
CHAPTER7
WherearetheClients’Yachts?:ReasonableFeeStructures 159
The“GammaTrade” 161
AnatomyofaBlowup 167
Catch22 168
FaultsofExistingFeeStructures 170
OurRecommendation:HighIntegrityFee
Structures 178
Conclusion 186
CHAPTER8
FinalThoughts 187
CharacteristicsofGreatAssetManagementFirms 188
ItStartswithaSharedMissionandValues 188
TrueMeritocracy 189
AvoidingthePitfalls 190
ForSuccessfulClientOutcomes:Communicate,
Communicate,Communicate 192
It’sAllaboutIncentives 193
Integrity 193
Notes 195
Bibliography 201
AbouttheAuthors 205
Index 207
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